SR&ED payroll strategy overview.page

SRED payroll strategy

NOTE: This is a complicated topic that involves a serious amount of planning. Needless to say, this is not a DIY project and if you are considering applying a strategy of this complexity, you should contact a professional accountant with experience in processing SRED returns. 

I frequently hear startup owners describe their disappointment with the SRED credit offered by the Federal government as they prefer to keep money in the business.
 
So how do you keep money in the business while still paying a salary? Timing.

The strategy: Declare the future payment of a salary on the last day of your fiscal year. Submit a SRED claim the day after your yearend based on the salary you declared. Receive a cheque from the CRA for 44% of the amount you claimed. Pay yourself the salary you declared (and withhold/pay the payroll taxes you owe – estimated to be 15-20%). Lend the “net of payroll taxes” amount back to the company. The next effect is you received approx. 20% of a refund without having any cash leave the business. You are now also entitled to be paid the net of tax loan you made to the company tax free at any time.

NOTE: As mentioned above, this is a very complex and highly technical planning area. It 100% requires the assistance of a professional account. This post was to demonstrate that it is possible.